First Quantum Minerals Ltd. (“First Quantum” or the “Company”) (TSX:FM) announces preliminary production for the three months (“Q4”) and year ended December 31, 2022 and guidance for production, capital expenditure and costs for the years 2023 to 2025.
“It is pleasing to see that the focus on operational improvements has resulted in a strong end to 2022. We continue to monitor the macroeconomic conditions closely and debt reduction remains a priority,” commented Tristan Pascall, Chief Executive Officer. “Disciplined and responsible growth continue to be a focus at First Quantum. The CP100 Expansion remains on schedule to exit 2023 at 100 million tonnes per annum and work is well underway for the S3 Expansion. We are also pleased that the Enterprise nickel project will enter first production this year. These projects are a key part of the Company’s brownfield growth strategy over the next several years.”
Q4 and 2022 Production: First Quantum achieved annual copper production of 776 thousand tonnes (“kt”) a 5% reduction from 2021. Cobre Panamá delivered record annual production of 350kt, while Sentinel saw a year- on-year increase to 242kt. Kansanshi production of 146kt was lower than 2021 due to lower grades. Copper production in Q4 2022 was 206kt, 2% higher than Q4 2021 and 6% higher than Q3 2022 with record quarterly production achieved at Sentinel.
Three–year guidance: Copper and nickel production are forecast to grow to between 775-865kt and 45-60kt, respectively, by 2025. Capital expenditure guidance has increased to $1.6 billion in 2023 and $1.8 billion in 2024, reducing to $1.5 billion in 2025 with the completion of the S3 Expansion project at Kansanshi. Increases in 2023 and 2024 are principally due to inflationary pressures on sustaining capital and timing of expenditures for project capital. This includes the re-phasing of the S3 Expansion, and higher costs for crusher relocations at the mine sites.
Cobre Panamá: As per the news release on January 10, 2023, First Quantum continues to engage with the Government of Panamá and remains ready to reach an agreement that is fair and equitable to both parties. The Company had indicated to the Government of Panama that it is prepared to accept and pay a minimum of $375 million per year to the Government of Panama, comprised of corporate taxes and a profit-based mineral royalty of 12 to 16 percent, with downside protections. As previously announced, Minera Panamá, S.A. (“MPSA”) is working through a number of steps to address the resolution from the National Directorate of Mineral Resources of the Ministry of Commerce and Industries (“the Ministry”) requiring MPSA to suspend commercial operations at Cobre Panamá. At this time, the timing and impact of any care and maintenance regime enacted by the Ministry remain uncertain. Given this, production guidance is based on normal operations with no disruption to production.
2022 PRELIMINARY PRODUCTION AND 2023
– 2025 GUIDANCE 2022 Preliminary Production
First Quantum achieved annual copper production of 776kt that was within the 2022 revised guidance range of 755kt to 785kt. Copper production in Q4 2022 was 206kt, 4kt above Q4 2021 and 11kt above Q3 2022.
Cobre Panamá achieved record copper production of 350kt for the full year, 19kt more than 2021. Copper production in Q4 2022 of 90kt was an increase of 10kt from Q4 2021, but 2kt lower than Q3 2022 due to a total plant shutdown in November for planned maintenance. Cobre Panamá’s performance for the last three quarters remained strong and achieved new weekly and monthly throughput records in December.
Sentinel achieved copper production of 242kt for the full year, 9kt higher than 2021, and record quarterly production of 73kt in Q4 2022, 13kt higher than Q4 2021 and 9kt higher than Q3 2022. Production was impacted in Q1 2022 by a delay to Stage 2 North-wall stripping due to wet underfoot conditions during an extended rainy season but has improved each quarter since then. Throughput has also been strong, achieving monthly and quarterly records in Q4 2022 and an annual record in 2022.
Kansanshi copper production of 146kt for the full year was 56kt lower than 2021. The lower production reflects a combination of lower sulphide grades from narrow-veined regions, depleting oxide ore and restricted access to high- grade blocks due to an accumulation of water in the main pit in the second and third quarters of 2022. Copper production in Q4 2022 was 35kt, a reduction of 17kt from Q4 2021, but 5kt higher than Q3 2022 as access to high- grade areas improved following successful dewatering of the pit.
Other sites achieved consolidated copper production of 38kt for the full year, a 12kt reduction from 2021, resulting from declining production from short life mines. Copper production at the Pyhäsalmi mine in Finland ceased at the end of Q3 2022.
The production and sales figures provided herein are preliminary and subject to final adjustment. The final production and sales figures will be confirmed in the Company’s financial results for the fourth quarter and year ended December 31, 2022.
2023 – 2025 Guidance
Guidance is based on a number of assumptions and estimates as of December 31, 2022, including among other things, assumptions about metal prices and anticipated costs and expenditures. Guidance involves estimates of known and unknown risks, uncertainties and other factors, which may cause the actual results to be materially different.
As per the news release on January 10, 2023, First Quantum continues to engage with the Government of Panama and the Company remains ready to reach an agreement that is fair and equitable to both parties. The Company had indicated to the Government of Panama that it is prepared to accept and pay a minimum of $375 million per year to the Government of Panama, comprised of corporate taxes and a profit-based mineral royalty of 12 to 16 percent, with downside protections. As previously announced, MPSA is working through a number of steps to address the resolution from the Ministry requiring MPSA to suspend commercial operations at Cobre Panama. At this time, the timing and impact of any care and maintenance regime enacted by the Ministry remain uncertain. Given this, production guidance for Cobre Panama is based on normal operations with no disruption to production
Production for 2023 for Cobre Panamá includes commissioning in Q1 2023 with a ramp-up over the course of the year to achieve an annualized throughput rate of 100 million tonnes per annum by the end of 2023.
Kansanshi copper production in 2023 and 2024 reflects similar levels as 2022 with lower oxide grades and sulphide grades while mining vein-hoisted areas. Copper and gold production in 2025 includes some limited production associated with the S3 Expansion, expected to commence in the second half of 2025.
Higher gold production in 2024 for other sites is due to higher production expected at Guelb Moghrein with the expansion of the Carbon-in-Leach plant, to be complete in the first half of 2024, and the inclusion of Cutback 4.
Nickel production at Enterprise is expected to commence in the first half of 2023 with ramp up to full plant throughput and recovery in 2024. 2023 production guidance for Enterprise includes 5kt of pre-commercial production results.
C1 cost guidance for both copper and nickel reflects recent inflationary and commodity price pressures. AISC guidance reflects higher sustaining capital expenditure, partly mitigated by a decrease in royalties specifically in Zambia relating to recent changes announced by the Zambian government. The Zambian import duty on fuel was reinstated on January 1, 2023, however this reinstatement was at a ‘free rate’, resulting in a nil impact on costs.
Unit cost guidance for the three-year guidance period is based on an assumed gold price of between $1,700/oz and $1,750/oz, average Brent crude oil price of $100/barrel and Zambian kwacha/US dollar exchange rate of 16. A coal price of $150/tonne is assumed for 2024 and 2025.
Enterprise unit cost guidance if provided from its first full year of production in 2024. First production at Enterprise is expected in the first half of 2023. Ravensthorpe unit cost guidance is based on a sulphur price of $150/tonne.
Collective Bargaining Agreement negotiations at Sentinel, Kansanshi, FQMO and Enterprise are expected to close in the first half of 2023. Anticipated labour cost increases have been included in cost estimates.
Capital expenditures have been experiencing inflationary cost increases, including higher shipping rates, steel prices, fuel costs, and labour rates. Guidance on capital expenditures for 2023 and 2024 has increased to reflect such cost increases as well as additional increases arising from scope definition, expansion of Environmental, Social and Governance (“ESG”) initiatives and the timing of expenditures, including some expenditure carried over from 2022 and the acceleration of some expenditure related to the Kansanshi S3 Expansion project.
Total capital expenditure for the S3 Expansion project remains unchanged at $1.25 billion, with approximately $40 million spent to date. The S3 Expansion includes the development and construction of the S3 process plant circuit and mining fleet acquisitions. Across the three year guidance period, project capital expenditures for the S3 Expansion project are expected to be approximately $900 million, with the majority of the spend to occur over 2023 and 2024. Pre-strip activities for the South East Dome pit is expected to continue through to 2027, of which $300 million is included in the three-year capital budget for the S3 Expansion.
Project capital in the three-year guidance period includes:
Additional capital expenditures at Kansanshi, including the expansion of the tailings facility and smelter of approximately $300 million,
$650 million in capital expenditures at Cobre Panamá for the development of the Colina pit, work on the West Dam, purchase of additional mining fleet, expansion of camp facilities and assembly of the molybdenum flotation and filtration plant,
$200 million in capital expenditures at Sentinel for the relocation of in-pit crusher 2 and the purchase of additional mining equipment, and
$35 million for the completion of the Enterprise nickel project.
The three-year guidance includes ESG-related projects within the $2.6 billion project capital expenditures. Each of these projects are expected to also improve cost structure, safety and productivity of the business. These include;
Upgrade of the Kansanshi smelter to increase processing capacity, which reduces downstream greenhouse gas emissions from the transport and refining of copper concentrate produced by Kansanshi and Sentinel,
A wind farm at Ravensthorpe to reduce reliance on power from diesel back-up generators, subject to final approval,
Expansion of trolley assist infrastructure across the Company’s three largest mines to lower diesel consumption and associated mine fleet greenhouse gas emissions,
Relocation and installation of in-pit crushers to optimize haul cycle efficiency and reduce mine fleet diesel consumption,
Investments at Cobre Panamá and Trident to enhance the social infrastructure serving both our workforce and local communities, and,
Water initiatives at various operations for the management of water quality and reuse by operations.
Three-year guidance for project capital expenditure does not include any development expenditure for the Las Cruces Underground Project, Taca Taca or Hacquira.
All of our Company’s major operations have planned for increases in sustaining expenditure, which has been impacted by significant cost inflation as well as an increase in TSF costs and increase in fleet replacement programs.
Capital expenditure guidance excludes capitalized pre-commercial production results.